Tag Archives: system dynamics

I recently read a McKinsey Quarterly article on “Why leadership-development programs fail”. The article highlights several factors that, while appearing obvious on the surface, are often misunderstood: overlooking context, decoupling reflection from real work, underestimating mind-sets and failing to measure results.

Since I have personal experience of some of these pitfalls, I thought I could enhance the lessons from the McKinsey article by sharing some of my observations; thus, enabling you to make the right decisions when it comes to developing leaders within your own organisation.

Let’s start with the first pitfall: overlooking context. The article points out that a brilliant leader in one situation may not perform well in another. Although this is not unusual, it makes you wonder whether that person was a real leader to start with. Real leaders are able to anticipate and adapt to any situation because they carry more than one arrow in their quiver. Just because a formula worked in the past does not mean it will work forever. Different situations demand different approaches and tools. Versatility is an important trait of good leadership. People who stick to the tried and proven approach often do so because they are comfortable with it or, even worse, because they don’t know what else to do – not exactly a sign of strong leadership.

But I guess this also proves the point that a generic approach to leadership development – the one size fits all attitude – is not appropriate. Everyone is different; someone’s strength is someone else’s weakness. This almost guarantees that in a classroom setting someone will be bored. This may also help explain why the article points out that adults retain just ten per cent of what they learn in the classroom. Personally, instead of trying to fight against this phenomenon, I prefer to use it to our advantage by pairing up executives who display the opposite strengths and weaknesses. For example, someone with great personal skills could be matched with someone who has difficulties with people but who is brilliant at strategic thinking. This not only helps individuals, it strengthens the leadership team by reinforcing the bonds between senior leaders. This approach also helps bridge the second pitfall – decoupling reflection from real work – because it provides leaders with time to reflect and analyse their own performance in a non-threatening setting. It also encourages growth and development because it allows leaders to monitor their progress – thereby addressing the last pitfall of failing to measure results.

The remaining pitfall – underestimating mind-sets – is more difficult to deal with. In most organisations, there exists a huge gap between the top floor and the shop floor. Leaders are so far removed from the day-to-day activities of the organisation that they have often lost their sense of reality. This misunderstanding frequently leads to suboptimal policies and plays to internal politics and infighting. Without understanding the real organisational dynamic behind undesirable behaviours, it is unlikely that sustainable behavioural change can be achieved. As the article points out, people’s actions are often derived from entrenched beliefs, which regularly go unquestioned simply because they are so obvious. This is where consultants – who are not tainted by years of “business as usual” – can add considerable value. They can provide an unbiased view of reality and identify the drivers of undesirable behaviours. Consultants provide leaders with a unique opportunity to look at themselves in the mirror and map out the shortest way to get results.

In this day and age, there isn’t time to sit and watch what happens in your market. If you want to succeed, you need to take control of your own destiny. Most CEOs realize this, they often scramble for ideas on how to improve their operations and, too often, jump on the bandwagon of the latest fad with the hope that it will solve their problems or give them an edge over their competitors. They have heard the stories from their peers on the golf course or the tennis club. They have read the articles in magazines, they may even have spoken to a smooth talking consultant; all singing the praises of the latest “revolution” in productivity and lower cost. The more they think about it the better it sounds.

One classic example goes back to the late ‘90s, when the 6 Sigma methodology became widely seen as the Holy Grail of business improvement. Many people thought: “If companies like GE can be successful with 6 Sigma than why shouldn’t we?” What a lot of people learned, though, is that there is no point in learning 6 Sigma if you don’t have any data to process. And, of course, that success isn’t measured in the number of, say, trained Black Belts. Success appears as an increase in bottom-line results.

So before you sign up your organisation to the next revolution you need to ensure the right conditions are in place, that the grounds have been plowed and fertile so the seeds you will plant through the new approach and methodology will have the best chance to grow.

The biggest killer of such initiatives is the lack of time. If your organisation operates in fire fighting mode your people are busy running from one emergency to the next. It is very difficult for them to find the time to sit down and analyse a problem to identify it’s root causes. It’s like the story of the lumberjack who was so busy cutting down trees that he didn’t have time to sharpen his saw.

Besides, the reactive nature of the organisational dynamics make it difficult for people to accept the proactive approach of the new methodologies; it goes against the organisational culture of rewarding people who solve problems when they happen rather than rewarding people who anticipate and take actions to avoid problems altogether.

This is why your journey to Operational Excellence needs to start with the basics: Planning, Execution and Follow-Up. By forcing people to think about the future you automatically change the organisational dynamics away from fire fighting to proactive actions.

This may seem obvious, but you’d be amazed to find how many companies operate without one or two of the three.

Execution is a given—without execution, there is no revenue. And every company engages in some degree of Planning, whether it’s in budgeting, sales or logistics. How ‘granular’ that planning is, and/or how much room for improvement is built into that process, are two different questions.

It is in Follow-Up that most organizations stumble. There often just seems not to be enough time to do a proper review of the Planning and Execution, let alone perform root causes analyses on the deviation between what you planned to make and what you really made. People forget that deviations are golden opportunities to learn, improve and save time. But I guess this is also nothing new, most managers will regularly look at deviations to understand performance. There is even a name for this: Management by Exceptions.

Note that it is one thing for managers to practice Management by Exceptions; it is another when operators do it. In my experience, to achieve the next level of organizational maturity, one needs to look at plan deviation, from management to the operators. If you can get your shop floor operators to apply the same techniques, then you will have made a huge jump in organizational maturity. Empowering employees to analyze deviations and make decisions without consulting their superiors (within their freedom box) not only gives employees more job satisfaction, it tightens the control of your operation and produces better results.

Ok, I got distracted by the election and was so flabbergasted by what I was hearing in the media that I was too emotionally charged to be writing anything. Now the election is over and we are back to square one, yes Obama has been re-elected but the status quo in the House of Representatives and the senate has not really changed the divisive political mood; not to mention long list of other threats menacing us, Greece and the rest of Europe have not resolved their debt problem and the US is heading for the fiscal cliff, let’s just hope this is not a remake of Thelma & Louise.

Consequently, there is a lot of talk about austerity in Europe at the moment, and in some cases it makes good sense but people tend to forget that austerity is by design a constricting measure for the economy. One of the things I have learned during my consulting career is that unintended consequences can sometimes undermine the very effort to fix a problem. This is where “system dynamics” and causal loops diagram can be useful to explore and express the dynamics at play in a given situation. To help explain what happens with austerity, I have developed the following model. The model is quite rudimentary and as it was created in Insight Maker, it is available to anyone to expand on, improve or correct what is already there. (so if you have any input to making my model better, please update it yourself or let me know). You will notice that austerity has the potential to be a severe vicious cycle depending on how it is applied.

Quite frankly I don’t believe Greece will ever be able to repay it’s debt, especially not by cutting spending alone. The current depressive cycle the country is one is only exacerbating the problem. In fact just like in the US, the debt problem needs to be a balance approach of revenue generation (ie Tax reforms) and spending reforms. Let’s face it the tax system in Greece is a disaster, and this is nothing new. The Greek politicians have kick the tax reform “can” so far down the road that the “can” is falling apart in pieces and there is nothing left to kick.

But, whatever gets done on taxes, it will have to be attractive. Greece needs urgently to get its population back to work, so creating private sector jobs has to be a priority.

The other side of the coin is spending. You may have picked up that I just the term spending reform rather than spending cuts. That is because I believe there is a fundamental difference and that one is sustainable and the other isn’t. Spending cuts equal less services or investment in the future, and as you have seen in the model they constrict the economy. Spending reforms reviewing what you spend money on and what you get in return. There are some great success stories of how one man was able to transform the purchasing process within government, under President Clinton, there by savings 100’s millions $ in the process. My experience tells me there are still billions $ if not 100’s billions in inefficiencies within government processes, in six sigma we call this the hidden factory. In fact perhaps the best way to think about this is the illustration with the iceberg.

The estimated cost of poor quality, expressed as % of turnover

The estimated cost of poor quality, expressed as % of turnover

The sad part, and often overlooked, is that the majority of these inefficiencies are known or have even been documented. The organization, in our case government, is just not capable to foster the kind of organizational maturity that would allow such opportunities to be addressed. And although the government may be often ranked at the bottom of the scale when it come to “appeal”, there are only a few organizations, world wide, that have the necessary transparency and values to motivate their workforce to truly strive for perfection and continuous improvement. Look at it this way: how many people do you know trust their boss and organization so much that he would be willing to tell his boos how o make his own job redundant; because he would know that was the best way to demonstrate his value & commitment to the organization?

Ok some of you may have some Japanese friends where something like this is more likely to take place, precisely because they have developed mature organization where the workforce feels stronger together than the sum of the individuals, creating a strong identity! Identity is one of the magic ingredients that separate “groups” from “teams”. But wait a minute we are talking about government here, not Google! Looking for saving opportunities in government processes should be like looking for eggs in a henhouse. There may not be an egg under each hen but you pretty certain you will find some eggs.

As I mentioned above the first step of sliming down government were initiated under Clinton, and a lot of services and processes have been out sourced. In fact the Bush administration conveniently rode that wave when the same trimming down effort and clarification of “core competences” was applied to the military and the military contractor industry was created, suspiciously creating huge profits for companies like Blackwater & Halliburton in the process. This is also the message Obama is trying to tell the American people when he says that some things are best done together. He has put a canvas that has some broad strokes on it but the question remains whether the other politicians will be willing to shape the landscape and add the color. Nevertheless the road to sustainable prosperity would clearly be smoother with a reinvigorated workforce of loyal civil servants that pride themselves on their work and looks after the governments interest as if the were his own. Seeding the seeds for continuous improvement in government could be a low cost endeavor with immense potential returns.